Correlation Between Microsoft and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Microsoft and Choice Hotels at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Choice Hotels International, you can compare the effects of market volatilities on Microsoft and Choice Hotels and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Choice Hotels.
Diversification Opportunities for Microsoft and Choice Hotels
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Choice is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Microsoft i.e., Microsoft and Choice Hotels go up and down completely randomly.
Pair Corralation between Microsoft and Choice Hotels
Given the investment horizon of 90 days Microsoft is expected to under-perform the Choice Hotels. In addition to that, Microsoft is 1.63 times more volatile than Choice Hotels International. It trades about 0.0 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.31 per unit of volatility. If you would invest 14,084 in Choice Hotels International on August 29, 2024 and sell it today you would earn a total of 1,096 from holding Choice Hotels International or generate 7.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Choice Hotels International
Performance |
| Timeline |
| Microsoft |
| Choice Hotels Intern |
Microsoft and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Choice Hotels
The main advantage of trading using opposite Microsoft and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Choice Hotels can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |